SEXUAL HARASSMENT IN THE UNION VS. NON-UNION WORLDS

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1 American Bar Association, Labor and Employment Law Section Employment Rights and Responsibilities Committee Mid-Winter Meeting Key West, FL March 28, !----- SEXUAL HARASSMENT IN THE UNION VS. NON-UNION WORLDS -----!----- Part I: Introduction to the Basic Differences Between Labor and Employment Arbitration I. Introduction. A. 14 Penn Plaza v. Pyett, U.S. Supreme Court No , cert. granted Feb. 19, 2008, on which the United States Supreme Court heard argument December 1, 2008, could overrule Alexander v. Gardner- Denver, 415 U.S. 36 (1974). That case preserved the right of an employee an employee covered by a collective bargaining agreement to commence court litigation of his racial discrimination claim after he had lost a labor arbitration that addressed the same issue. If the Supreme Court reverses the Second Circuit and enforces the collective bargaining agreement s arbitration provision to enjoin Pyett s claim, plaintiffs lawyers may find themselves in the unfamiliar territory of labor arbitration. 1. This program will explore the differences between labor and employment arbitration. a. Parties will have to educate labor arbitrators in how to handle statutory claims as employment arbitrators must do in a process that must mirror court litigation. B. The essence of the difference has to do with the purpose of each process. Employment arbitration is a substitute for court litigation. Labor arbitration is a substitute for industrial strife. Page 1 of 51

2 C. Similarities. 1. All arbitration is contractual. Both employment arbitration and labor-management arbitration start with an agreement to submit existing or future disputes to binding arbitration by a third party. That is the agreement courts will enforce as the exclusive process for resolving the issues so submitted. In both cases, labor-management and employment, the court will enforce such agreements to stay lawsuits involving arbitrable issues and compel arbitration of those claims. D. Differences. 1. How issues arise, sources of law, substantive issues, burdens of proof, procedures, discovery, rules of evidence, remedies, and standards of judicial review. II. Employment Arbitration. A. The complaint will arise as the result of alleged hostile environment or quid pro quo sexual harassment. The claimant will most likely be the victim, who will be alleging violations of federal and State statutory and common law duties. B. The claimant will bear the burden of proving the essential elements of each of her (or his) claims for relief. C. The parties procedural and substantive rights will be essentially identical to what they would have enjoyed in court litigation of the same issues. 1. See Gilmer v. Interstate Johnson Lane, 500 U.S. 20 (1991) and Circuit City Stores v. Adams, 532 U.S. 105 (2001), holding that employees who agree to arbitrate statutory claims are just substituting forums, not substantive rights to relief. In this context, arbitration substitutes for litigation in court. Page 2 of 51

3 2. Employer-imposed arbitration programs that do not provide for reasonable discovery or full rights to relief have been denied enforcement as unconscionable contracts of adhesion. See, e.g., Hooters of America, Inc. v. Phillips, 173 F.3d 933 (3 Cir. 1999) D. Employment arbitrators awards are subject to judicial review by a manifest disregard of the law standard. See, e.g., Cole v. Burns International Security, 105 F.3d 1465 (D.C. Cir. 1997). III. Labor-Management Arbitration. A. Unlike commercial and employment arbitration, which substitute for court litigation, labor arbitration substitutes for industrial strife; and the relevant jurisprudence the U.S. Supreme Court s Steelworkers Trilogy, 363 U.S. 564 et seq. (1960) and their progeny focuses on that difference and Congress s policy declaration of arbitration as the preferred method for resolving labor-management disputes. B. Labor arbitrators sit to enforce the terms of collective bargaining agreements between employers and unions setting terms and conditions of employment for bargaining unit employees whom the union represents. A typical labor contract s grievance procedure defines a grievance as a claimed misinterpretation, misapplication, or violation of the express terms of this Agreement and submits all unresolved grievances to arbitration. Sexual harassment claims must accordingly arise as claimed violations of that agreement s terms, not from a general agreement to arbitrate all disputes arising out of or concerning the employment relationship. 1. You cannot know whether or how sexual harassment issues will arise in a labor-management arbitration without knowing the specific terms of the collective bargaining agreement relevant to the parties dispute. a. For example, a typical substantive provision of a collective bargaining agreement is The employer shall Page 3 of 51

4 not discipline or discharge an employee without just cause. Grievances under that provision arise as challenges to discipline that the employer has imposed without just cause. (1) A sexual harassment issue would typically arise if, after investigating one employee s sexual harassment complaint, the employer fires the accused for misconduct (or, for that matter, the complainant for falsely raising a sexual harassment accusation). (2) In such cases, the employer must justify its disciplinary action by establishing just cause for the discharge. The employer accordingly has the burden of proof of the essential elements of just cause. If it fails to bear that burden, the likely remedy will be grievant s reinstatement with back pay and benefits. b. Another example with a different twist: the collective bargaining agreement contains a no-discrimination clause like Neither the employer nor the union shall discriminate against any bargaining unit employee on grounds of race, color, religion, sex, or national origin. (1) In this case, the likely sexual harassment grievant would be the complainant, who would be arguing that the employer s failure to address her complaint violated the no-discrimination clause. The contract would be deemed to incorporate antidiscrimination law, but the arbitrator would be limited to traditional labor-management remedies. (2) According to Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998), a collective bargaining agreement s arbitration provision Page 4 of 51

5 C. Rules of evidence. cannot oust a bargaining unit employees right to sue in court unless the union s waiver is clear and unmistakable. The claimant is more likely to pursue her remedies at law than in a collective bargaining agreement s arbitration procedure. c. A third example: the collective bargaining agreement provides that seniority governs promotions among candidates who are able to do the job. Grievant claims she was denied a promotion because she refused to accede to a manager s sexual proposition. (1) Here too grievant would have the burden of proof as to the essential elements of her contract claim: (a) her seniority, (b) her ability to do the job, and, although not strictly necessary to prevail, (c) the manager s proposition. (2) Again, the likely remedy would be limited to retroactive awarding of the promotion with back pay for the difference in compensation. 1. Labor arbitrators are less likely to apply strict rules of evidence than are employment arbitrators. I ll take it for what it s worth is a mantra of some labor arbitrators who believe that, as an extension of the grievance procedure, arbitration must serve a cathartic purpose. Others impose fairly strict standards of relevance and probative value in order to focus the process on the issues the specific grievance before them raise. a. The outer limit of evidentiary exclusions is arbitrable misconduct in the legal sense: refusing to consider material and competent evidence that will impel a reviewing court to vacate an award and remand the case back to the arbitrator for reconsideration. Page 5 of 51

6 D. Scope of Review. 1. In labor arbitration, the court s scope of review is limited to determining whether the award draws its essence from the parties collective bargaining agreement. Because the Supreme Court has recognized that collective bargaining agreements are a system of industrial self-government, and that parties cannot anticipate in five or even fifty pages the multiplicity of issues that a complex workplace can generate, arbitrators are essential to fill in the gaps, to flesh out the skeleton of labor contracts words, and so to enable the parties to continue a productive relationship avoiding the disruptions of commerce that strikes cause. 2. In employment arbitration of statutory claims, manifest disregard of the law is the scope of judicial review. An arbitrator can be wrong on the law, but he or she cannot be aware of the law and then ignore it. An example would be where an arbitrator acknowledges that the ADA provides for attorney s fees to the prevailing party but fails to award them. IV. Conclusion. A. Today s program will illustrate the differences with a series of scenarios based on identical fact situations involving two employers, one non-union whose employees are subject to mandatory arbitration of statutory claims, and the other subject to a collective bargaining agreement that clearly and unambiguously subjects statutory claims to a grievance procedure that culminates in labor arbitration. 1. The scenarios will alternate between an employment arbitration and labor arbitration to illustrate how differently employment and labor arbitrators operate. Page 6 of 51

7 Part II: Illustrative Scenarios. As noted, this exercise assumes two different employers, the first, a nonunion company whose employees are subject to individual employment agreements that require submission of future disputes to arbitration. The second is a union company with a collective bargaining agreement that includes a grievance procedure culminating in arbitration of contract disputes. It also assumes identical employees at each employer and an identical incident at each employer. There ensues four scenarios illustrating the differences between arbitrations of an employment law claims and of labor-management disputes arising out of the same incident. From time to time the moderator will ring a bell to stop action, comment on what s going on, and invite comments from the panel and questions from the audience. Here are the basic facts: I. The Two Employers: A. Employer No. 1: Management Unlimited Technical Services. MUTS employees are not represented by a union. All candidates for employment employees signed an application form that included the following term: I understand that the only employment offered by MUTS and that for which I am applying is employment-at-will as that term is defined by State law. In consideration for MUTS processing this application for employment-atwill, I agree that, if I should become an employee of MUTS, any disputes between us arising out of or concerning my employment by MUTS or its termination shall be submitted to arbitration pursuant to the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. I also understand that, if I should become an employee of MUTS, by having signed and submitted this application, I am waiving my right to a jury trial in any future litigation between me and MUTS, including but not limited to claims for violation of federal and State laws against discrimination. I understand and acknowledge that I have the right and Page 7 of 51

8 opportunity to discuss this agreement with my attorney before signing it and that MUTS will give me time to do so. B. Employer No. 2: Grand Union Technical Services. GUTS non-supervisory employees are represented by a union, Local 15 of the United Computer Service Workers. The parties collective bargaining agreement provides the following relevant clauses: 1. Discipline. No employee shall be disciplined or discharged without just cause. For purposes of this section, just cause shall include, without limitation, theft, falsification of records, intentional destruction of property, and fighting on the employer s premises. 2. Non-Discrimination. Neither the employer nor the union shall discriminate against any bargaining unit member with respect to terms and conditions of employment on the basis of race, religion, sex, age, national origin, disability, sexual orientation, or union activity. Claimed violations of this clause and of relevant applicable State and federal law enforcing these obligations shall be subject to the grievance and arbitration procedures of this Agreement. 3. Grievance Procedure. (A) (B) A grievance is defined as any dispute between the parties concerning the interpretation, application, or alleged violation of any term of this Agreement. The following procedure shall be the exclusive method for dealing with grievances and enforcing the obligations of this Agreement. Grievances will be discussed at the first step by representatives of management and the union in an effort to determine the relevant facts and reach a voluntary resolution. Page 8 of 51

9 (C) Any grievance not voluntarily resolved by the parties shall be submitted to arbitration pursuant to the Labor Arbitration Rules of the American Arbitration Association. 4. Promotions. Seniority measured from the date of first employment by GUTS shall govern entitlement to promotions where candidates have equal qualifications to perform the duties of the vacant promotional position. II. The Identical Employees at Each Employer: A. Amy Attractive. Amy has 10 years employment with the employer and has compiled a record of excellent performance evaluations. She has risen through a series of promotional titles in the employer s Information Technology Department, each with progressively higher responsibilities and compensation. She is now a Team Leader, the second highest non-supervisory position in the IT Department. B. Larry Lateral. Larry was hired in 2007 as a Team Leader, a position in which he had eight years excellent service at a similar company. During his two years service within this employer, he has compiled a record of excellent performance evaluations doing work identical to Amy s. C. Victor Vindictive. Victor has been the employer s Vice President of IT for the last five years, having been hired away from another company where he had supervised Larry Lateral. From his first day at this company, Victor has been infatuated with Amy and has continually tried to establish a personal relationship with her. Amy has made clear that his attentions are unwelcome and that all she wants is to do an excellent job and some day reach a management position. On the most recent such occasion, Victor told Amy, You re making a big mistake; I can be very helpful to Page 9 of 51

10 your career. Amy has not, however, filed a complaint pursuant to the firm s detailed sexual harassment policy, which has been one of the subjects covered in an annual training session on company policies. III. The Identical Incident at Each Employer. The employer s long-time Lead Technician retires. That position is the highest non-supervisory title in the company and the one next up in promotion line from the Team Leader title that Amy and Larry occupy. The employer posts that vacancy in accordance with its long-established practice, and both Amy and Larry apply. Victor calls Amy to his office and shows her a memo he proposes to send awarding the promotion to Larry. Amy complains that what Victor proposes to do is wrong. Victor says, It s your own fault, but it s not too late. Victor tries to embrace Amy, and in the ensuing struggle to free herself, Amy s elbow knocks off Victor s glasses, and she accidentally steps on them, crushing one of the lenses. Amy says, You re impossible; I m out of here. Victor replies, That s good, because you re fired. He then issues the memo and promotes Larry. IV. The Scenarios. A. GUTS (The unionized employer). Amy has filed a grievance with Local 15 citing violations of the Discipline, Non-Discrimination, and Promotion provisions of the parties collective bargaining agreement and seeking reinstatement with back pay, retroactive promotion to Lead Technician, damages for pain and suffering, and punitive damages. The union seeks reimbursement for its attorneys fees with respect to the Discrimination claim. The parties are unable to reach a voluntary settlement of her claims, and the union has timely demanded arbitration pursuant to the American Arbitration Association s Labor Arbitration Rules (Attachment A). Pursuant to those Rules, the American Arbitration Association has designated Jacqueline Justice to arbitrate the claim. Page 10 of 51

11 B. MUTS (The non-union employer). Amy has retained counsel and sued MUTS and Victor in Superior Court for violation of the New Jersey Law Against Discrimination, wrongful discharge, intentional infliction of emotional distress, assault and battery, punitive damages, and attorneys fees. MUTS has successfully moved to dismiss her complaint and compel arbitration. The parties have chosen John Justice to arbitrate her claims pursuant to the American Arbitration Association s National Rules for the Resolution of Employment Disputes (Attachment B). They have also signed Arbitrator Justice s Agreement for Arbitration Services (Attachment C). C. The Action, 1. Pre-Hearing Issues a. Procedure. b. Discovery. c. Parties. d. Motion Practice. e. Pre-hearing Submissions. 2. Hearing Issues a. Burdens of proof. b. Evidentiary rulings. 1. Hearsay. 2. Relevance. 3. Admissibility. c. Expert testimony. d. Sanctions. e. Mediation? Part III: Questions and Answers. Page 11 of 51

12 ATTACHMENT A Page 12 of 51

13 American Arbitration Association Labor Arbitration Rules Amended and Effective August 1, Agreement of Parties The parties shall be deemed to have made these rules a part of their arbitration agreement whenever, in a collective bargaining agreement or submission, they have provided for arbitration by the American Arbitration Association (hereinafter the AAA) or under its rules. These rules and any amendment thereof shall apply in the form obtaining when the arbitration is initiated. The parties, by written agreement, may vary the procedures set forth in these rules. 2. Name of Tribunal Any tribunal constituted by the parties under these rules shall be called the Labor Arbitration Tribunal. 3. Administrator When parties agree to arbitrate under these rules and an arbitration is instituted thereunder, they thereby authorize the AAA to administer the arbitration. The authority and obligations of the administrator are as provided in the agreement of the parties and in these rules. 4. Delegation of Duties The duties of the AAA may be carried out through such representatives or committees as the AAA may direct. 5. Panel of Neutral Labor Arbitrators The AAA shall establish and maintain a Panel of Neutral Labor Arbitrators and shall appoint arbitrators there from as hereinafter provided. Attachment A Page 13 of 51

14 6. Office of Tribunal The general office of the Labor Arbitration Tribunal is the headquarters of the AAA, which may, however, assign the administration of an arbitration to any of its regional offices. 7. Initiation under an Arbitration Clause in a Collective Bargaining Agreement Arbitration under an arbitration clause in a collective bargaining agreement under these rules may be initiated by either party in the following manner: a. by giving written notice to the other party of its intention to arbitrate (demand), which notice shall contain a statement setting forth the nature of the dispute and the remedy sought, and b. by filing at any regional office of the AAA three copies of the notice, together with a copy of the collective bargaining agreement or such parts thereof as relate to the dispute, including the arbitration provisions. After the arbitrator is appointed, no new or different claim may be submitted except with the consent of the arbitrator and all other parties. 8. Answer The party upon whom the demand for arbitration is made may file an answering statement with the AAA within ten days after notice from the AAA, simultaneously sending a copy to the other party. If no answer is filed within the stated time, it will be treated as a denial of the claim. Failure to file an answer shall not operate to delay the arbitration. 9. Initiation under a Submission Parties to any collective bargaining agreement may initiate an arbitration under these rules by filing at any regional office of the AAA two copies of a written agreement to arbitrate under these rules (submission), signed by the parties and setting forth the nature of the dispute and the remedy sought. Attachment A Page 14 of 51

15 10. Fixing of Locale The parties may mutually agree on the geographic region (locale) where the arbitration is to be held. If the locale is not designated in the collective bargaining agreement or submission, and if there is a dispute as to the appropriate locale, the AAA shall have the power to determine the locale and its decision shall be binding. 11. Qualifications of Arbitrator Any neutral arbitrator appointed pursuant to Section 12, 13, or 14 or selected by mutual choice of the parties or their appointees, shall be subject to disqualification for the reasons specified in Section 17. If the parties specifically so agree in writing, the arbitrator shall not be subject to disqualification for those reasons. Unless the parties agree otherwise, an arbitrator selected unilaterally by one party is a party-appointed arbitrator and is not subject to disqualification pursuant to Section 17. The term "arbitrator" in these rules refers to the arbitration panel, whether composed of one or more arbitrators and whether the arbitrators are neutral or party appointed. 12. Appointment from Panel If the parties have not appointed an arbitrator and have not provided any other method of appointment, the arbitrator shall be appointed in the following manner: immediately after the filing of the demand or submission, the AAA shall submit simultaneously to each party an identical list of names of persons chosen from the Panel of Labor Arbitrators. Each party shall have ten days from the mailing date in which to strike any name to which it objects, number the remaining names to indicate the order of preference, and return the list to the AAA. If a party does not return the list within the time specified, all persons named therein shall be deemed acceptable. From among the persons who have been approved on both lists, and in accordance with the designated order of mutual preference, the AAA shall invite the acceptance of an arbitrator to serve. If the parties fail to agree upon any of the persons named, if those named decline or are unable to act, or if for any other Attachment A Page 15 of 51

16 reason the appointment cannot be made from the submitted lists, the administrator shall have the power to make the appointment from among other members of the panel without the submission of any additional list. 13. Direct Appointment by Parties If the agreement of the parties names an arbitrator or specifies a method of appointing an arbitrator, that designation or method shall be followed. The notice of appointment, with the name and address of the arbitrator, shall be filed with the AAA by the appointing party. Upon the request of any appointing party, the AAA shall submit a list of members of the panel from which the party may, if it so desires, make the appointment. If the agreement specifies a period of time within which an arbitrator shall be appointed and any party fails to make an appointment within that period, the AAA may make the appointment. If no period of time is specified in the agreement, the AAA shall notify the parties to make the appointment and if within ten days thereafter such arbitrator has not been so appointed, the AAA shall make the appointment. 14. Appointment of Neutral Arbitrator by Party-Appointed Arbitrators If the parties have appointed their arbitrators or if either or both of them have been appointed as provided in Section 13, and have authorized those arbitrators to appoint a neutral arbitrator within a specified time and no appointment is made within that time or any agreed extension thereof, the AAA may appoint a neutral arbitrator who shall act as chairperson. If no period of time is specified for appointment of the neutral arbitrator and the parties do not make the appointment within ten days from the date of the appointment of the last partyappointed arbitrator, the AAA shall appoint a neutral arbitrator who shall act as chairperson. If the parties have agreed that the arbitrators shall appoint the neutral arbitrator from the panel, the AAA shall furnish to the partyappointed arbitrators, in the manner prescribed in Section 12, a list selected from the panel, and the appointment of the neutral arbitrator shall be made as prescribed in that section. Attachment A Page 16 of 51

17 15. Number of Arbitrators If the arbitration agreement does not specify the number of arbitrators, the dispute shall be heard and determined by one arbitrator, unless the parties otherwise agree. 16. Notice to Arbitrator of Appointment Notice of the appointment of the neutral arbitrator shall be sent to the arbitrator by the AAA and the signed acceptance of the arbitrator shall be filed with the AAA prior to the opening of the first hearing. 17. Disclosure and Challenge Procedure No person shall serve as a neutral arbitrator in any arbitration under these rules in which that person has any financial or personal interest in the result of the arbitration. Any prospective or designated neutral arbitrator shall immediately disclose any circumstance likely to affect impartiality, including any bias or financial or personal interest in the result of the arbitration. Upon receipt of this information from the arbitrator or another source, the AAA shall communicate the information to the parties and, if it deems it appropriate to do so, to the arbitrator. Upon objection of a party to the continued service of a neutral arbitrator, the AAA, after consultation with the parties and the arbitrator, shall determine whether the arbitrator should be disqualified and shall inform the parties of its decision, which shall be conclusive. 18. Vacancies If any arbitrator should resign, die, or otherwise be unable to perform the duties of the office, the AAA shall, on proof satisfactory to it, declare the office vacant. Vacancies shall be filled in the same manner as that governing the making of the original appointment, and the matter shall be reheard by the new arbitrator unless the parties agree upon an alternative arrangement. 19. Date, Time, and Place of Hearing Attachment A Page 17 of 51

18 The parties shall respond to requests for hearing dates in a timely manner, be cooperative in scheduling the earliest practicable date, and adhere to established deadlines and hearing schedules. Upon the request of either party or the AAA, the arbitrator shall have the authority to convene a scheduling conference call and/or issue a Notice of Hearing setting the date, time and place for each hearing. The parties will receive a formal written Notice of Hearing detailing the arrangements agreed to by the parties or ordered by the arbitrator at least five days in advance of the hearing date, unless otherwise agreed by the parties. 20. Representation Any party may be represented by counsel or other authorized representative. 21. Stenographic Record and Interpreters Any party wishing a stenographic record shall make arrangements directly with a stenographer and shall notify the other parties of such arrangements in advance of the hearing. The requesting party or parties shall pay the cost of the record. If the transcript is agreed by the parties to be or, in appropriate cases, determined by the arbitrator to be the official record of the proceeding, it must be made available to the arbitrator and to the other party for inspection, at a time and place determined by the arbitrator even if one party does not agree to pay for the transcript. Any party wishing an interpreter shall make all arrangements directly with the interpreter and shall assume the costs of the service. 22. Attendance at Hearings Persons having a direct interest in the arbitration are entitled to attend hearings. The arbitrator shall have the power to require the retirement of any witness or witnesses during the testimony of other witnesses. It shall be discretionary with the arbitrator to determine the propriety of the attendance of any other person. 23. Postponements Attachment A Page 18 of 51

19 The arbitrator for good cause shown may postpone the hearing upon the request of a party or upon his or her own initiative and shall postpone when all of the parties agree thereto. 24. Oaths Before proceeding with the first hearing, each arbitrator may take an oath of office and, if required by law, shall do so. The arbitrator may require witnesses to testify under oath administered by any duly qualified person and, if required by law or requested by either party, shall do so. 25. Majority Decision Whenever there is more than one arbitrator, all decisions of the arbitrators shall be by majority vote. The award shall also be made by majority vote unless the concurrence of all is expressly required. 26. Order of Proceedings A hearing shall be opened by the filing of the oath of the arbitrator, where required; by the recording of the date, time, and place of the hearing and the presence of the arbitrator, the parties, and counsel, if any; and by the receipt by the arbitrator of the demand and answer, if any, or the submission. Exhibits may, when offered by either party, be received in evidence by the arbitrator. The names and addresses of all witnesses and exhibits in order received shall be made a part of the record. The arbitrator may vary the normal procedure under which the initiating party first presents its claim, but in any case shall afford full and equal opportunity to all parties for the presentation of relevant proofs. 27. Arbitration in the Absence of a Party or Representative Unless the law provides to the contrary, the arbitration may proceed in the absence of any party or representative who, after due notice, fails to be present or fails to obtain a postponement. An award shall not be made solely on the default of a Attachment A Page 19 of 51

20 party. The arbitrator shall require the other party to submit such evidence as may be required for the making of an award. 28. Evidence and Filing of Documents The parties may offer such evidence as is relevant and material to the dispute, and shall produce such additional evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. An arbitrator authorized by law to subpoena witnesses and documents may do so independently or upon the request of any party. The arbitrator shall be the judge of the relevance and materiality of the evidence offered and conformity to legal rules of evidence shall not be necessary. All evidence shall be taken in the presence of all of the arbitrators and all of the parties except where any of the parties is absent in default or has waived the right to be present. All documents that are not filed with the arbitrator at the hearing, but arranged at the hearing or subsequently by agreement of the parties to be submitted, shall be filed with the AAA for transmission to the arbitrator or transmitted to the arbitrator directly if the parties agree. All parties shall be afforded the opportunity to examine such documents. Documents may be filed by regular or electronic mail or telephone facsimile, and will be deemed timely if postmarked or otherwise transmitted to the arbitrator or the AAA on or before the due date. 29. Evidence by Affidavit The arbitrator may receive and consider the evidence of witnesses by affidavit, giving it only such weight as seems proper after consideration of any objection made to its admission. 30. Inspection Whenever the arbitrator deems it necessary, he or she may make an inspection in connection with the subject matter of the dispute after notice to the parties, who may, if they so desire, be present at the inspection. Attachment A Page 20 of 51

21 31. Closing of Hearings The arbitrator shall inquire of all parties whether they have any further proof to offer or witness to be heard. Upon receiving negative replies or if satisfied that the record is complete, the arbitrator shall declare the hearings closed and a minute thereof shall be recorded. If briefs or other documents are to be filed, the hearings shall be declared closed as of the final date set by the arbitrator for filing with the AAA. If documents are to be filed as provided in Section 28 and the date for their receipt is later than the date set for the receipt of briefs, the later date shall be the date of closing the hearing. The time limit within which the arbitrator is required to make an award shall commence to run, in the absence of another agreement by the parties, upon the closing of the hearings. 32. Reopening of Hearings The hearings may for good cause shown be reopened by the arbitrator at will or on the motion of either party at any time before the award is made but, if the reopening of the hearings would prevent the making of the award within the specific time agreed upon by the parties in the contract out of which the controversy has arisen, the matter may not be reopened unless both parties agree to extend the time. When no specific date is fixed in the contract, the arbitrator may reopen the hearings and shall have 30 days from the closing of the reopened hearings within which to make an award. 33. Waiver of Oral Hearings The parties may provide, by written agreement, for the waiver of oral hearings. If the parties are unable to agree as to the procedure, the AAA shall specify a fair and equitable procedure. 34. Waiver of Rules Any party who proceeds with the arbitration after knowledge that any provision or requirement of these rules has not been complied with and who fails to state an objection thereto in writing shall be deemed to have waived the right to object. Attachment A Page 21 of 51

22 35. Extensions of Time The parties may modify any period of time by mutual agreement. The AAA or the arbitrator may for good cause extend any period of time established by these rules, except the time for making the award. The AAA shall notify the parties of any such extension of time and its reason therefor. 36. Serving of Notice Each party to a submission or other agreement that provides for arbitration under these rules shall be deemed to have consented and shall consent that any papers, notices, or process necessary or proper for the initiation or continuation of an arbitration under these rules; for any court action in connection therewith; or for the entry of judgment on an award made there under may be served upon the party by mail addressed to the party or its representative at the last known address or by personal service, in or outside the state where the arbitration is to be held. The AAA and the parties may also use facsimile transmission, telex, telegram, or other written forms of electronic communication to give the notices required by these rules. 37. Time of Award The award shall be rendered promptly by the arbitrator and, unless otherwise agreed by the parties or specified by law, no later than 30 days from the date of closing the hearings as provided in Section 31, with five additional days for mailing if briefs are to be filed or other documents are to be transmitted pursuant to Section 28. If oral hearings have been waived, the award shall be rendered no later than 30 days from the date of transmitting the final statements and proofs to the arbitrator. The award shall be deemed to be "rendered" on the date it is postmarked or otherwise transmitted to the AAA by the arbitrator, whether by regular mail, electronically, or by telephone facsimile. If an award is transmitted electronically or by facsimile, the arbitrator shall promptly deliver an original copy to the AAA. Attachment A Page 22 of 51

23 38. Form of Award The award shall be in writing and shall be signed either by the neutral arbitrator or by a concurring majority if there is more than one arbitrator. The parties shall advise the AAA whenever they do not require the arbitrator to accompany the award with an opinion. 39. Award upon Settlement If the parties settle their dispute during the course of the arbitration, the arbitrator may, upon their request, set forth the terms of the agreed settlement in an award. 40. Delivery of Award to Parties Parties shall accept as legal delivery of the award the placing of the award or a true copy thereof in the mail by the AAA, addressed to the party at its last known address or to its representative; personal service of the award; or the filing of the award in any other manner that is permitted by law. 41. Release of Documents for Judicial Proceedings The AAA shall, upon the written request of a party, furnish to such party, at its expense, certified facsimiles of any papers in the AAA's possession that may be required in judicial proceedings relating to the arbitration. 42. Judicial Proceedings and Exclusion of Liability a. Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary party in judicial proceedings relating to the arbitration. b. Neither the AAA nor any arbitrator shall be liable to any party for any act or omission in connection with any arbitration conducted under these rules. 43. Administrative Fees As a not-for-profit organization, the AAA shall prescribe an administrative fee schedule to compensate it for the cost of providing administrative services. The schedule in effect at the time of filing shall be applicable. Attachment A Page 23 of 51

24 44. Expenses The expenses of witnesses for either side shall be paid by the party producing such witnesses. Expenses of the arbitration, other than the cost of the stenographic record, including required traveling and other expenses of the arbitrator and of AAA representatives and the expenses of any witness or the cost of any proof produced at the direct request of the arbitrator, shall be borne equally by the parties, unless they agree otherwise, or unless the arbitrator, in the award, assesses such expenses or any part thereof against any specified party or parties. 45. Communication with Arbitrator There shall be no direct communication between the parties and a neutral arbitrator on substantive matters relating to the case other than at oral hearings, unless the parties and the arbitrator agree otherwise. Any other oral or written communication from the parties to the arbitrator shall be directed to the AAA for transmittal to the arbitrator. This rule does not prohibit communications on non-substantive matters such as travel arrangements and driving directions, nor does it prohibit direct communications in special circumstances (such as emergency delays) when the AAA case manager is unavailable. 46. Interpretation and Application of Rules The arbitrator shall interpret and apply these rules insofar as they relate to the arbitrator's powers and duties. When there is more than one arbitrator and a difference arises among them concerning the meaning or application of any such rule, it shall be decided by a majority vote. If that is unobtainable, the arbitrator or either party may refer the question to the AAA for final decision. All other rules shall be interpreted and applied by the AAA. Attachment A Page 24 of 51

25 ATTACHMENT B Attachment B Page 25 of 51

26 American Arbitration Association Employment Arbitration Rules Amended and Effective July 1, 2006 Table of Contents 1. Applicable Rules of Arbitration 2. Notification 3. AAA as Administrator of the Arbitration 4. Initiation of Arbitration 5. Changes of Claim 6. Jurisdiction 7. Administrative and Mediation Conferences 8. Arbitration Management Conference 9. Discovery 10. Fixing of Locale 11. Date, Time, and Place of Hearing 12. Number, Qualifications, and Appointment of Neutral Arbitrators 13. Party Appointed Arbitrators 14. Appointment of Chairperson by Party-Appointed Arbitrators or Parties 15. Disclosure 16. Disqualification of Arbitrator 17. Communication with Arbitrator 18. Vacancies 19. Representation 20. Stenographic Record 21. Interpreters 22. Attendance at Hearings 3. Confidentiality 24. Postponements 25. Oaths 26. Majority Decision 27. Dispositive Motions 28. Order of Proceedings 29. Arbitration in the Absence of a Party or Representative 30. Evidence Attachment B Page 26 of 51

27 31. Inspection 32. Interim Measures 33. Closing of Hearing 34. Reopening of Hearing 35. Waiver of Oral Hearing 36. Waiver of Objection/Lack of Compliance with These Rules 37. Extensions of Time 38. Serving of Notice 39. The Award 40. Modification of Award 41. Release of Documents for Judicial Proceedings 42. Applications to Court 43. Administrative Fees 44. Neutral Arbitrator s Compensation 45. Expenses 46. Deposits 47. Suspension for Non-Payment 48. Interpretation and Application of Rules 1. Applicable Rules of Arbitration The parties shall be deemed to have made these rules a part of their arbitration agreement whenever they have provided for arbitration by the American Arbitration Association (hereinafter "AAA") or under its Employment Arbitration Rules and Mediation Procedures or for arbitration by the AAA of an employment dispute without specifying particular rules*. If a party establishes that an adverse material inconsistency exists between the arbitration agreement and these rules, the arbitrator shall apply these rules. If, within 30 days after the AAA's commencement of administration, a party seeks judicial intervention with respect to a pending arbitration and provides the AAA with documentation that judicial intervention has been sought, the AAA will suspend administration for 60 days to permit the party to obtain a stay of arbitration from the court.these rules, and any amendment of them, shall apply in the form in effect at the time the demand for arbitration or submission is received by the AAA. Attachment B Page 27 of 51

28 2. Notification An employer intending to incorporate these rules or to refer to the dispute resolution services of the AAA in an employment ADR plan, shall, at least 30 days prior to the planned effective date of the program: i. notify the Association of its intention to do so and, ii. provide the Association with a copy of the employment dispute resolution plan. Compliance with this requirement shall not preclude an arbitrator from entertaining challenges as provided in Section 1. If an employer does not comply with this requirement, the Association reserves the right to decline its administrative services. 3. AAA as Administrator of the Arbitration When parties agree to arbitrate under these rules, or when they provide for arbitration by the AAA and an arbitration is initiated under these rules, they thereby authorize the AAA to administer the arbitration. The authority and duties of the AAA are prescribed in these rules, and may be carried out through such of the AAA's representatives as it may direct. The AAA may, in its discretion, assign the administration of an arbitration to any of its offices. 4. Initiation of Arbitration Arbitration shall be initiated in the following manner. a. The parties may submit a joint request for arbitration. b. In the absence of a joint request for arbitration:. The initiating party (hereinafter "Claimant[s]") shall: a. File a written notice (hereinafter "Demand") of its intention to arbitrate at any office of the AAA, within the time limit established by the applicable statute of limitations. Any dispute over the timeliness of the demand shall be referred to the arbitrator. The filing shall be made in duplicate, and each copy shall include the applicable arbitration agreement. The Demand shall set forth the names, addresses, and telephone numbers of Attachment B Page 28 of 51

29 the parties; a brief statement of the nature of the dispute; the amount in controversy, if any; the remedy sought; and requested hearing location. b. Simultaneously provide a copy of the Demand to the other party (hereinafter "Respondent[s]"). c. Include with its Demand the applicable filing fee, unless the parties agree to some other method of fee advancement.. The Respondent(s) may file an Answer with the AAA within 15 days after the date of the letter from the AAA acknowledging receipt of the Demand. The Answer shall provide the Respondent's brief response to the claim and the issues presented. The Respondent(s) shall make its filing in duplicate with the AAA, and simultaneously shall send a copy of the Answer to the Claimant. If no answering statement is filed within the stated time, Respondent will be deemed to deny the claim. Failure to file an answering statement shall not operate to delay the arbitration.. The Respondent(s): f. May file a counterclaim with the AAA within 15 days after the date of the letter from the AAA acknowledging receipt of the Demand. The filing shall be made in duplicate. The counterclaim shall set forth the nature of the claim, the amount in controversy, if any, and the remedy sought. g. Simultaneously shall send a copy of any counterclaim to the Claimant. h. Shall include with its filing the applicable filing fee provided for by these rules.. The Claimant may file an Answer to the counterclaim with the AAA within 15 days after the date of the letter from the AAA acknowledging receipt of the counterclaim. The Answer shall provide Claimant's brief response to the counterclaim and the issues presented. The Claimant shall make its filing in duplicate with the AAA, and simultaneously shall send a copy of the Answer to the Respondent(s). If no answering statement is filed within the stated Attachment B Page 29 of 51

30 time, Claimant will be deemed to deny the counterclaim. Failure to file an answering statement shall not operate to delay the arbitration. j. The form of any filing in these rules shall not be subject to technical pleading requirements. 5. Changes of Claim Before the appointment of the arbitrator, if either party desires to offer a new or different claim or counterclaim, such party must do so in writing by filing a written statement with the AAA and simultaneously provide a copy to the other party(s), who shall have 15 days from the date of such transmittal within which to file an answer with the AAA. After the appointment of the arbitrator, a party may offer a new or different claim or counterclaim only at the discretion of the arbitrator. 6. Jurisdiction a. The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. b. The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause. c. A party must object to the jurisdiction of the arbitrator or to the arbitrability of a claim or counterclaim no later than the filing of the answering statement to the claim or counterclaim that gives rise to the objection. The arbitrator may rule on such objections as a preliminary matter or as part of the final award. 7. Administrative and Mediation Conferences Before the appointment of the arbitrator, any party may request, or the AAA, in its discretion, may schedule an administrative conference with a representative of the AAA and the parties and/or their representatives. The purpose of the Attachment B Page 30 of 51

31 administrative conference is to organize and expedite the arbitration, explore its administrative aspects, establish the most efficient means of selecting an arbitrator, and to consider mediation as a dispute resolution option. There is no administrative fee for this service. At any time after the filing of the Demand, with the consent of the parties, the AAA will arrange a mediation conference under its Mediation Procedures to facilitate settlement. The mediator shall not be any arbitrator appointed to the case, except by mutual written agreement of the parties. There is no administrative fee for initiating a mediation under AAA Mediation Procedures for parties to a pending arbitration. 8. Arbitration Management Conference As promptly as practicable after the selection of the arbitrator(s), but not later than 60 days thereafter, an arbitration management conference shall be held among the parties and/or their attorneys or other representatives and the arbitrator(s). Unless the parties agree otherwise, the Arbitration Management Conference will be conducted by telephone conference call rather than in person. At the Arbitration Management Conference the matters to be considered shall include, without limitation i. the issues to be arbitrated; ii. the date, time, place, and estimated duration of the hearing; iii. the resolution of outstanding discovery issues and establishment of discovery parameters; iv. the law, standards, rules of evidence, and burdens of proof that are to apply to the proceeding; v. the exchange of stipulations and declarations regarding facts, exhibits, witnesses, and other issues; vi. the names of witnesses (including expert witnesses), the scope of witness testimony, and witness exclusion; vii. the value of bifurcating the arbitration into a liability phase and damages phase; viii. the need for a stenographic record; Attachment B Page 31 of 51

32 ix. whether the parties will summarize their arguments orally or in writing; x. the form of the award; xi. any other issues relating to the subject or conduct of the arbitration; xii. the allocation of attorney's fees and costs; xiii. the specification of undisclosed claims; xiv. the extent to which documentary evidence may be submitted at the hearing; xv. the extent to which testimony may be admitted at the hearing telephonically, over the internet, by written or video-taped deposition, by affidavit, or by any other means; xvi. any disputes over the AAA's determination regarding whether the dispute arose from an individually-negotiated employment agreement or contract, or from an employer-promulgated plan (see Costs of Arbitration section). The arbitrator shall issue oral or written orders reflecting his or her decisions on the above matters and may conduct additional conferences when the need arises. There is no AAA administrative fee for an Arbitration Management Conference. 9. Discovery The arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration. The AAA does not require notice of discovery related matters and communications unless a dispute arises. At that time, the parties should notify the AAA of the dispute so that it may be presented to the arbitrator for determination. 10. Fixing of Locale (the city, county, state, territory, and/or country of the arbitration) If the parties disagree as to the locale, the AAA may initially determine the place of arbitration, subject to the power of the arbitrator(s), after their appointment to make a final determination on the locale. All such determinations shall be made Attachment B Page 32 of 51